Commonwealth Senior Living is on the cusp of having a new owner.
Health care real estate company Invesque (TSX: IVQ.U and IVQ) has reached a definitive agreement to sell its interest in the Commonwealth management company and in 20 Commonwealth properties. This is on the heels of Invesque selling seven other Commonwealth senior living communities, the company announced in an Oct. 17 press release.
The Commonwealth team is excited about these changes and believes that they will benefit all parties involved, Commonwealth CEO and President Earl Parker told Senior Housing News.
Invesque CEO Adlai Chester conveyed similar sentiments in emailed comments to SHN, and he emphasized that a reduction in leverage was the “primary driver” for the deal from the Invesque perspective.
After the release of $222 million in mortgage debt and $58.6 million in preferred equity, and some other adjustments, Invesque will use the proceeds of the Commonwealth management company and 20-property sale in part to reduce borrowings under its credit facility with KeyBank.
If all recently announced transactions close as anticipated, Invesque’s leverage will be below 50%, representing more than a 30% reduction since June 30.
“For the last 18 months, Invesque has been laser focused on improving our balance sheet, and this proposed transaction is in-line with that strategy,” Chester told SHN.
He and Parker declined to disclose the identity of the prospective buyer, but confirmed that a single entity is lined up to acquire the 20 properties as well as the Commonwealth management company.
The CEOs also declined to share the acquisition price. The pricing is above the Commonwealth’s depreciated book value, according to Invesque’s press release.
“The sales price was adequate enough to accomplish our goals as a company,” Chester told SHN.
Invesque initially acquired the Commonwealth management company and 20 communities for $340 million in 2019, and subsequently continued to expand the portfolio.
The seven Commonwealth communities that already traded in a separate recent transaction included three in Maryland, three in Virginia and one in Tennessee. That deal came in at $65.4 million, which equates to $184,000 per unit. Invesque used the proceeds to pay off property-level mortgage debt and reduce its KeyBank borrowings by $6.1 million, while retaining $7.8 million to preserve liquidity.
The buyer of the seven communities has not been disclosed, but the management of those assets transitioned to an operator affiliated with the new owner, effective as of the deal closing on Oct. 15.
Improving the financial outcomes of the seven-property portfolio, paving the way for this sale, was one of the notable accomplishments of Commonwealth’s partnership with Invesque, Parker told SHN.
He and Chester both are bullish on the future of senior housing. At its founding, Invesque was primarily invested in skilled nursing, but has been on a years-long journey to dispose of SNF assets and rebalance the portfolio toward private-pay senior housing. In fact, Invesque sold a skilled nursing facility in Illinois as recently as Sept. 23. Following that $16.5 million sale, Invesque now owns only two SNFs.
The Commonwealth sale does not signal any change in Invesque’s focus on senior housing.
“Post this transaction, and other previously announced transactions, Invesque will be a low levered seniors housing company with a core portfolio of strong cash flowing assets,” Chester said.
Parker told SHN he is also optimistic about the future for senior housing, citing demographic tailwinds, the slowdown in new development, and improvements in the staffing challenges, including less intense upward wage pressures.
Commonwealth’s future
The plan is for Commonwealth to continue operating the 20 communities that are poised to change hands from Invesque to the new owner.
“The communication with the buyer is that they’re excited by what we do and not looking for any significant change in strategy or team,” Parker told SHN.
Commonwealth operates 13 communities in addition to the 20 communities involved in the Invesque deal. Charlottesville, Virginia-based Commonwealth has a concentrated footprint in Virginia, North Carolina and Maryland, and also operates in Pennsylvania, Connecticut and Michigan.
Even after the recent seven-community exit, Commonwealth’s overall resident capacity is only about 50 residents lower than it was at this time in 2023, due to some larger communities being added, Parker noted.
Achieving this level of scale is one of the main legacies of the Invesque era, he said. Commonwealth operated 23 communities when Invesque acquired the management company in 2019, and the portfolio quickly expanded to 34 communities.
“It gave us the impetus to jump up a level in portfolio size,” Parker said, of joining up with Invesque.
Big-picture, Commonwealth remains focused on improving resident and associate satisfaction and financial outcomes, according to Parker. More specifically, a top priority is the rollout of a new wellness program.
The program, called Journeys, is being piloted at eight communities and leverages the TSOLife technology platform that Commonwealth uses.
“It’s for our residents and associates; building personalized, customized lifestyle and care based around what’s important to them, and their individual wants, needs and desires,” Parker said. “That encompasses all aspects of resident care, dining, programming and coordination of outside services.”
Such a move to prioritize wellness and a more personalized experience dovetails with industry trends. Other providers, including Juniper Communities, Mather, and Insight Living – among many others – are also implementing models with these characteristics.
Ultimately, the objective is to increase length of stay while also elevating the resident experience, Parker said. Commonwealth hopes to launch Journeys across the company’s whole portfolio in Q1 of 2025.
Overall, Parker said that the shift in ownership, positive industry tailwinds, and initiatives like Journeys have the Commonwealth team feeling upbeat.
“We’re excited about this,” he said.
